NICOSIA, Cyprus – The International Monetary Fund said Thursday it won’t release $108 million (88 million euros) in rescue money for bailed-out Cyprus after the country’s parliament voted to hold a key foreclosure law from taking effect at the end of December.
An IMF statement said the month-long suspension of the law contravened the terms of its $12.28 billion (10 billion euro) rescue deal reached in March last year. The law would have made it easier for the country’s hobbled banks to start collecting on bad loans, which account for around half of all loans.
The statement said the IMF will discuss the next steps with Cypriot authorities. The European Union had released a $430 million (350 million euro) installment prior to the vote, bringing the amount of bailout cash given to Cyprus so far to $7 billion (5.7 billion euros).
Lawmakers said they approved the suspension to give the government time to draft additional insolvency legislation that would act as an extra buffer protecting those who lost jobs or saw their income slashed amid the country’s near financial meltdown from also losing their homes.
But Finance Minister Harris Georgiades called the suspension “unnecessary and inexcusable,” adding that it undermined Cyprus’ credibility.
“It simply sends the message that we haven’t overcome a mindset and attitudes that have so dearly cost us in the past,” said Georgiades.
Government officials have said Cyprus’ steadfast adherence to the terms of its rescue program is mainly responsible for the country consistently beating dour projections regarding its post-bailout economic performance.
The economy is projected to grow 0.4 per cent next year, which would bring an end to a three-year recession that has been shallower than expected.
This is the second time that Cyprus has run into trouble with its creditors over the foreclosures law. In September, Cyprus’ eurozone partners refused to release a bailout installment after parliament passed additional legislation weakening the law. The hurdle was overcome after lawmakers backtracked and amended some of the legislation while the Supreme Court struck down other pieces as unconstitutional.